I HOLD THIS TRUTH TO BE SELF-EVIDENT, THAT A DEBT CRISIS CANNOT BE RESOLVED WITH MORE DEBT

Thursday, April 19, 2012

Quo Vadis, EUropa?

France holds the first round of its presidential elections this Sunday and Greece has scheduled parliamentary elections for May 6, coinciding with the second and decisive round for French elections. In France the Socialist candidate is the frontrunner against the incumbent conservative Mr. Sarkozy, while in Greece popular sentiment is hugely against the entrenched two-party system that so obscenely mismanaged the country for the past four decades. (Germany will hold its federal elections in September 2013 - or earlier under certain circumstances).

Is a likely political shift in two countries enough to steer the EU towards a new direction? Perhaps it is. France is, by far, the second most important nation in the Eurozone (and perhaps number one from a historical EU perspective), while Greece is currently undergoing history's largest debt restructuring.

Where are you going, Europe?

And what direction could this be? Well, in my opinion, there are only two possibilities:

a) The Eurozone falls apart, to be followed shortly by the breakup of the EU itself.

b) Europe's new(?) leaders finally realize that a monetary union without fiscal and real political union is untenable, so they take bold steps to unite the EU in fact.

I believe that no sane European wants the first choice - there is just too much at stake to give up. The last seven decades have seen the longest period of uninterrupted peace in Europe for many, many centuries; remember that the EU was established chiefly to avoid future wars and not as a means to create efficiencies of economic scale.

It is not pleasant to watch Europe going through its current pains. Hopefully, however, they are birthing pains and the result will be a better, more truly united Europe.

5 comments:

"a) The Eurozone falls apart, to be followed shortly by the breakup of the EU itself.b) Europe's new(?) leaders finally realize that a monetary union without fiscal and real political union is untenable, so they take bold steps to unite the EU in fact." --- You are of course right about this, but I believe it will just end up dragging along with neither of these outcomes. No way Germany will agree to a fiscal union, their public will not allow it. It will be survival, bailout after bailout, until the edifice collapses.

About Me

I was educated as a chemical engineer but spent almost my entire career in finance, particularly in money, FX and bond markets. The name stands for Hell-as-IOUs and the picture points to Quixotic endeavors.